Friday, August 5, 2011

Mr. Tanzi vs Mr. Taylor

You are known in the literature for the Tanzi Effect. What’s the secret for getting one’s name attached to an economic phenomenon?

The Tanzi Effect was actually described in two of my papers—the first which described the impact of inflation on revenue, and another which extrapolated this effect to the problem it creates when inflation is intentionally implemented to provide resources for investment. However, getting one’s name on a concept is by no means a guarantee! Take, for example, the Laffer curve. Laffer became very famous for his idea that when tax rates are pushed above a certain level, revenue comes down. But I can point you to books written in the 1850s by Italian economists, who present his exact ideas, but in one clear paragraph! Similarly, there was an equation which appeared in a paper that I wrote in 1980 for the American Economic Review. The paper was edited by John Taylor, who later wrote a paper, which established the Taylor Rule, using this equation (which to be fair was not formulated exactly the same way I had written it). So, it’s a bit of a haphazard affair. I’m sorry, but I do not know the secret either! By the way, I had no role in naming the Tanzi effect, and would like to thank the first person who did!